A tax return is considered defective if it is submitted without all the requisite information or documentation mandated by law. Section 139(9) outlines a non-exhaustive list of situations that classify a return as defective.
The identified defect must be rectified within 15 days from the date of notification by the Assessing Officer (A,O.). Should the defect remain unaddressed within the specified time-frame, the return will be classified as invalid.
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It is common for individuals to overlook certain details or make errors when submitting their income tax returns. Such mistakes can render your tax return ‘defective,’ resulting in the issuance of a notice of defective return under Section 139(9) of the Income Tax Act.
The identified defect must be rectified within 15 days from the date of notification by the Assessing Officer (A,O.). Should the defect remain unaddressed within the specified time-frame, the return will be classified as invalid.
When is a tax return deemed as defective?
A tax return is considered defective if it is submitted without all the requisite information or documentation mandated by law. Section 139(9) outlines a non-exhaustive list of situations that classify a return as defective. Consequently, the Assessing Officer has the authority to classify a return as defective, even if the specific defect is not explicitly mentioned in the provision. The following is a list of illustrative defects.
1. Return form has not been duly filled
The income tax return form must be completed in accordance with the instructions provided within the form. Should an assessee be obligated to supply specific information in the return form and fails to do so, the return may be classified as a defective return.
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2. Return filed in an incorrect form
The tax return must be filed in the correct form which should be decided on the basis of the amount of income and nature of income. A return filed in an incorrect form is deemed as a defective return.
For example, if an HUF, not having any presumptive income, file its return in ITR-4, such return shall be treated as a defective return as it is mandatory to furnish the details of presumptive Income in ITR-4.
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3. Annexures or Statements not attached with return
As per Explanation to Section 139(9), various statements, computations, reports, proof of payment of taxes, accounts, etc., should accompany the return of income, otherwise, the return will become defective. However, Rule 12(2) of Income-tax Rules provides that ITR Forms shall not be accompanied by any document and all the required information shall be filed in the relevant Schedule of the ITR Forms. It further provides the list of all specified computations, reports or statements which shall be submitted electronically on e-filing website of Income-tax Dept.
“As the ITR return forms are attachment less forms, this provision of treating a return as defective has become redundant. Hence, a return will not become defective because of non-fulfilment of this requirement. However, taxpayers are required to retain these documents and must present them to the tax authorities upon request in circumstances such as assessments or inquiries,” informs CA Naveen Wadhwa, Vice-President, Taxmann.
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4. Proof of tax payment not accompanied with updated return
If an assessee has furnished an updated return, such return shall be accompanied by the proof of tax payment as required under section 140B, otherwise it shall be treated as a defective return.
Examples
A few circumstances wherein a return is deemed as a defective return are mentioned below:
(a) If a professional eligible for presumptive taxation scheme under Section 44ADA computes income in Section 44AD in Form ITR-4;
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(b) An employee claims Section 89 relief in ITR but failed to file Form 10E on e-filing portal;
(c) A manufacturer is required to maintain books of account but failed to mention details of P&L and Balance Sheet at the time of filing of ITR;
(d) Assessee fails to file all the schedules applicable as per the business code selected in ‘Nature of Business’;
(e) A trader is liable for tax audit under Section 44AB. However, the audit report has not been filed electronically.
(f) An assessee has furnished updated return but did not furnish details of tax payments as required under section 140B.
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Powers of CBDT
The CBDT is empowered to specify, vide notification, that any of the conditions as referred to above for treating a return as a defective return shall not apply for a class of assessee or shall apply with such modifications, as may be specified in such notification.
Intimation of Defect
In the event that an income tax return is deemed defective, the Assessing Officer will issue a notice to the taxpayer to inform them of the identified defect. The Assessing Officer may allow the taxpayer a period of 15 days from the date of notification to correct the defect. Nevertheless, the Assessing Officer has the authority to extend this time frame if the taxpayer submits a request for an extension.
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Consequences if defect isn’t rectified
Where assessee does not rectify the defect, the tax return shall be treated as an invalid return and provisions of the I-T Act shall apply as if the assessee has failed to file the return.
Where the assessee fails to rectify the defect within the time allowed or within extended time-limit, but rectifies before the assessment is made, the Assessing Officer may condone the defect and return may not be treated as invalid.
How to submit response to notice for defective return?
In case the Income Tax Commissioner issues a notice for the defective return through e-mail or by placing a suitable communication on the e-filing website, the assessee shall comply with the notice regarding defective return by uploading the rectified return within the period of time mentioned in the notice.
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The assessee shall not be required to appear either personally or through authorised representative before the authorities in connection with any proceedings. Written or electronic communication from such persons or authorised representatives in the format specified in this respect shall be sufficient compliance.
Consequences of defective return
“Where an assessee fails to rectify the defects within the time allowed for the same, he can apply to the Assessing Officer for condonation of delay in removing the defects. If such condonation is allowed and the assessee has removed the defects, the return filed by him will be treated as a valid return,” says Wadhwa.
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However, where such condonation is not allowed, the Assessing Officer is required to proceed against the assessee by passing an order for Best Judgement Assessment, as if no return was filed by the assessee. The Assessing Officer is required to follow all the steps required for passing such an order.
